-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ln1BQbmYn1BZIf3dUF3X/aacGyq/M+1vc1TFVBnmqRWKSvARxdWOeLC/wnqi+hq9 HA91lSAUMG/I3HtQo5YTGA== 0000821218-98-000002.txt : 19980331 0000821218-98-000002.hdr.sgml : 19980331 ACCESSION NUMBER: 0000821218-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEASTEC INCOME FUND V CENTRAL INDEX KEY: 0000821218 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER RENTAL & LEASING [7377] IRS NUMBER: 680136036 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18555 FILM NUMBER: 98579708 BUSINESS ADDRESS: STREET 1: 7175 W JEFFERSON AVE STE 3000 CITY: LAKEWOOD STATE: CO ZIP: 80235 BUSINESS PHONE: 3039801000 10-K 1 4Q97LIFV.001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1997 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 0-18555 LEASTEC INCOME FUND V, A CALIFORNIA LIMITED PARTNERSHIP ------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 68-0136036 (State of organization) (I.R.S. Employer Identification Number) 7175 W. JEFFERSON AVENUE, LAKEWOOD, COLORADO 80235 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 980-1000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Class A Limited Partner Interest (Title of Class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- -----. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K [ ]. State the aggregate market value of the voting stock held by non-affiliates of the registrant. Not applicable. Exhibit Index Appears on Page 31 Page 1 of 32 Pages Item 1. Business -------- Leastec Income Fund V, a California limited partnership (the "Partnership"), was engaged in the business of owning and leasing equipment. CAI Partners Management Company, a wholly-owned subsidiary of Capital Associates International, Inc. ("CAII") is the sole general partner of the Partnership (the "general partner"). CAII is the sole Class B limited partner of the Partnership. CAII contributed $2,501,890 in cash and equipment to the Partnership, which represented 10% of the net offering proceeds from sales of Class A limited partner units after September 1, 1988. CAII is the largest single investor in the Partnership. During 1997, the Partnership liquidated substantially all of its assets and distributed the related proceeds to the partners in accordance with the Partnership Agreement. The remaining assets will be liquidated and all liabilities settled during 1998. Excess cash, if any, will be distributed to the partners in accordance with the Partnership Agreement. Since its formation in 1987, the Partnership acquired equipment of various types under lease to third parties on short-term leases (generally five years or less). All of the equipment was purchased by CAII directly from manufacturers or from other independent third parties and sold to the Partnership. The equipment generally consisted of, but was not limited to, office technology and manufacturing equipment. The Partnership entered its liquidation period, as defined in the Partnership Agreement, during 1994. Accordingly, the Partnership did not purchase any equipment during 1997 or 1996 and it is anticipated that the Partnership will be liquidated and terminated in 1998. The Partnership may assign the rentals from leases to financial institutions, or acquire leases subject to such assignments, at fixed interest rates on a non-recourse basis. The financial institution has a first lien on the assigned rents and the underlying leased equipment, with no recourse against the Partnership or any other Partnership assets in the event of default by a lessee. Cash proceeds from such financings, or the assumption of such assignments incurred in connection with the acquisition of leases, are recorded on the balance sheet as discounted lease rentals. As lessees make payments to financial institutions, leasing revenue and interest expense are recorded. The Partnership leased equipment to investment grade and noninvestment grade lessees. Since the Partnership's formation, approximately 51% of the Partnership's equipment under lease was leased to investment grade lessees or equivalent. Pursuant to the Partnership Agreement, an investment grade lessee is a company (1) with a credit rating of not less than Baa, as determined by Moody's Investor Services, Inc., or (2) that has comparable credit ratings as determined by other recognized credit rating services or (3) which, if not rated by a recognized credit rating service, then in the opinion of the general partner, is of comparable credit quality. The Partnership limits its credit risk through selective use of non-recourse debt financing of future lease rentals, as described above. The Partnership only acquired equipment that was on lease at the time of acquisition. After the initial term of its lease, each item of equipment was expected to provide additional investment income from its re-lease or ultimate sale. Upon expiration of an initial lease, the Partnership attempted to re-lease or sell the equipment to the existing lessee. If a re-lease or sale to the lessee was not negotiated, the Partnership attempted to lease or sell the equipment to a third party. -2- Item 1. Business, continued -------- The ultimate rate of return on leases depends, in part, on interest rates at the time the leases were originated. Because leasing is an alternative to financing equipment purchases with debt, lease rates tend to rise and fall with interest rates (although lease rate movements generally lag interest rate changes in the capital markets). The Partnership has no employees. The officers, directors and employees of the general partner and its affiliates perform services on behalf of the Partnership. The general partner is entitled to receive certain fees and expense reimbursements in connection with the performance of these services. See Item 10 of this Report, "Directors and Executive Officers of the Partnership" and Item 13 of this Report, "Certain Relationships and Related Transactions". The Partnership competed in the leasing marketplaces as a lessor with a significant number of other companies, including equipment manufacturers, leasing companies and financial institutions. The Partnership is in its liquidation period. Therefore, the Partnership currently competes mainly on the basis of the expertise of its general partner in remarketing equipment. Although the Partnership does not account for a significant percentage of the leasing market, the general partner believes that the Partnership's remarketing strategies enable it to compete effectively in the remarketing markets. The Partnership leased equipment to a significant number of lessees. In 1997, two lessees accounted for 55% and 19%, respectively, of total Partnership revenue in 1997. The Partnership is required to dissolve and distribute all of its assets no later than December 31, 1998. Item 2. Properties ---------- The Partnership does not own or lease any physical properties other than the equipment discussed in Item 1 of this Report, "Business". Item 3. Legal Proceedings ----------------- Neither the Partnership nor any of the Partnership's equipment is the subject of any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- No matters were submitted to a vote of the limited partners of the Partnership, through the solicitation of proxies or otherwise, during the fourth quarter of 1997. -3- Item 5. Market for the Partnership's Common Equity and Related Stockholder ----------------------------------------------------------------------- Matters ------- (a) The Partnership's Class A limited partner units, Class B interest, and general partner interest are not publicly traded. There is no established public trading market for such units and interests, and none is expected to develop. (b) As of December 31, 1997 there were 3,856 Class A limited partners. (c) Distributions ------------- During 1997, the Partnership made five (5) quarterly and thirteen (13) monthly distributions all of which constituted a return of capital, to Class A limited partners (note that investors may elect to receive distributions either monthly or quarterly), as follows: Distributions Per $250 Class A Limited Partner Unit (computed on weighted average) For the Payment ------------------- Total Month Ended Made During Monthly Quarterly Distributions ------------------ ------------- ------- --------- ------------- December 31, 1996 January 1997 $ 1.01 $ 2.42 $ 199,756 January 31, 1997 February 1997 .53 - 105,167 February 28, 1997 March 1997 .53 - 105,167 March 31, 1997 April 1997 1.21 2.27 239,666 April 30, 1997 May 1997 .17 - 35,066 May 31, 1997 June 1997 .25 - 49,092 June 30, 1997 July 1997 .64 1.06 125,842 July 31, 1997 August 1997 .26 - 52,615 August 31, 1997 September 1997 .26 - 52,615 September 30, 1997 October 1997 .73 1.26 144,771 October 31, 1997 November 1997 .27 - 52,644 November 30, 1997 December 1997 .27 - 52,598 December 31, 1997 December 1997 1.58 2.12 313,888 ------ ------ ----------- $ 7.71 $ 9.13 $ 1,528,887 ====== ====== =========== Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital or both. The total return on capital over a leasing partnership's life can only be determined at the termination of the Partnership after all residual cash flows (which include proceeds from the re-leasing and sale of equipment after initial lease terms expire) have been realized. However, as the general partner has represented for the last several years, all distributions to the partners are expected to be a return of capital. Distributions to the general partner and the Class B limited partner during 1997 are discussed in Item 13 of the Report, "Certain Relationships and Related Transactions". -4- Item 5. Market for the Partnership's Common Equity and Related Stockholder ----------------------------------------------------------------------- Matters, continued ------- (c) Distributions The general partner anticipates that the Partnership will generate cash flow from rentals and equipment sales during 1998 which, when added to cash and cash equivalents on hand, should provide sufficient cash to enable the Partnership to meet its current operating requirements. Any remaining cash will be distributed to the Partners in accordance with the Partnership Agreement. The Class B limited partner distributions of cash from operations are subordinated to the Class A limited partners receiving cumulative distributions of cash from operations, as scheduled in the Partnership Agreement (i.e., 15%). Therefore, CAII, the sole Class B limited partner, is not receiving distributions of cash and will not receive any future Class B distributions. As a result, the general partner anticipates that CAII will only receive approximately $1.3 million or 54% of its original $2.5 million Class B investment. During 1996, the Partnership made four (4) quarterly and twelve (12) monthly distributions (all of which constituted a return of capital) to Class A limited partners, as follows: Distributions Per $250 Class A Limited Partner Unit (computed on weighted average) For the Payment ------------------- Total Month Ended Made During Monthly Quarterly Distributions ------------------ ------------- ------- --------- ------------- December 31, 1995 January 1996 $ .88 $ 1.29 $ 173,995 January 31, 1996 February 1996 .53 - 105,009 February 28, 1996 March 1996 1.41 - 280,024 March 31, 1996 April 1996 1.84 3.78 364,912 April 30, 1996 May 1996 .11 - 21,049 May 31, 1996 June 1996 .11 - 20,963 June 30, 1996 July 1996 .90 1.12 178,013 July 31, 1996 August 1996 .60 - 118,976 August 31, 1996 September 1996 1.77 - 349,840 September 30, 1996 October 1996 2.03 4.40 401,214 October 31, 1996 November 1996 .71 - 140,122 November 30, 1996 December 1996 .71 - 140,122 ------- ------- ----------- $ 11.60 $ 10.59 $ 2,294,239 ======= ======= =========== -5- Item 6. Selected Financial Data ----------------------- The following selected financial data relates to the years ended December 31, 1993 through 1997. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto appearing elsewhere herein.
1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Total revenue $ 1,951,428 $ 2,951,127 $ 3,914,124 $ 6,471,208 $ 9,789,449 Net income 846,318 1,123,494 1,057,734 1,107,121 1,040,550 Net income per weighted average Class A limited partner unit outstanding 3.77 4.86 4.70 3.99 3.05 Total assets 1,342,724 2,832,713 5,419,610 8,689,668 16,766,103 Discounted lease rentals - 721,550 2,061,334 4,231,393 6,518,735 Distributions declared to partners 1,399,085 2,442,105 1,801,042 5,624,247 8,152,711 Distributions declared per weighted average Class A limited partner unit 7.07 11.71 8.64 26.17 37.48
Item 7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations ------------- Results of Operations - --------------------- Presented below are schedules (prepared solely to facilitate the discussion of results of operations that follows) showing condensed statements of income categories and analyses of changes in those condensed categories derived from the Statements of Income:
Condensed Condensed Statements of Income The effect on Statements of The effect on for the years net income Income for the years net income ended December 31, of changes ended December 31, of changes ------------------------- between -------------------------- between 1997 1996 years 1996 1995 years ---------- ----------- ------------- -------------------------- ------------- Leasing margin $ 466,478 $ 1,110,749 $ (644,271) $ 1,110,749 $ 1,349,914 $ (239,165) Equipment sales margin 792,671 525,245 267,426 525,245 183,660 341,585 Interest income 17,543 20,203 (2,660) 20,203 11,760 8,443 Management fees paid to general partner (90,167) (169,573) 79,406 (169,573) (212,268) 42,695 Direct services from general partner (88,044) (66,223) (21,821) (66,223) (73,966) 7,743 General and administrative expenses (252,163) (296,907) 44,744 (296,907) (201,366) (95,541) ---------- ----------- ---------- ----------- ----------- ---------- Net income $ 846,318 $ 1,123,494 $ (277,176) $ 1,123,494 $ 1,057,734 $ 65,760 ========== =========== ========== =========== =========== ==========
-6- Item 7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations, continued ------------- Results of Operations, continued - --------------------- LEASING MARGIN Leasing margin consists of the following: Years Ended December 31, ------------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Operating lease rentals $ 1,051,376 $ 2,238,530 $ 3,459,761 Direct finance lease income 89,838 167,149 258,943 Depreciation (627,253) (1,172,100) (2,090,097) Interest expense on related discounted lease rentals (47,483) (122,830) (278,693) ----------- ----------- ----------- Leasing margin $ 466,478 $ 1,110,749 $ 1,349,914 =========== =========== =========== Leasing margin ratio 41% 46% 36 % =========== =========== =========== Leasing margin ratio fluctuates based upon; (i) the mix of direct finance leases and operating leases; (ii) remarketing activities; (iii) the method used to finance leases added to the Partnership's lease portfolio, as described above; and (iv) the relative age and types of leases in the portfolio (operating leases have a relatively lower leasing margin early in the lease term and increasing leasing margin as the lease term passes). All components of leasing margin have declined for the years ended December 31, 1997 and 1996, due to portfolio run-off. These components are expected to decline further in 1998. During 1996, leasing margin ratio increased primarily because a portion of the Partnership's portfolio consists of operating leases financed with non-recourse debt. Leasing margin and leasing margin ratio for an operating lease financed with non-recourse debt increases during the term of the lease since rents and depreciation are typically fixed while interest expense declines as the related non-recourse debt is repaid. The Partnership is in its liquidation period, as defined in the Partnership Agreement, and as expected, the Partnership is not purchasing additional equipment, initial leases are expiring and the equipment is being remarketed (i.e., re-leased, renewed or sold). As a result, both the size of the Partnership's leasing portfolio and the amount of leasing revenue are declining (referred to in this discussion as "portfolio run-off"). The ultimate rate of return on leases depends, in part, on interest rates at the time the leases are originated. Because leasing is an alternative to financing equipment purchases with debt, lease rates tend to rise and fall with interest rates (although lease rate movements generally lag interest rate movements in the capital market). -7- Item 7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations, continued ------------- Results of Operations, continued - --------------------- EQUIPMENT SALES MARGIN Equipment sales margin consists of the following: Years Ended December 31, --------------------------------------------- 1997 1996 1995 ---- ---- ---- Equipment sales revenue $ 1,406,215 $ 1,228,238 $ 378,905 Cost of equipment sales (613,544) (702,993) (195,245) ----------- ----------- ---------- Equipment sales margin $ 792,671 $ 525,245 $ 183,660 =========== =========== ========== The Partnership is in its liquidation period. Equipment sales margin increased as the Partnership was successful in realizing amounts on equipment greater than their net book values upon lease termination. Cost of equipment sales for the year ended December 31, 1997 includes a reversal of approximately $426,000 for amounts previously provided for estimated other-than-temporary declines in asset values. PROVISION FOR LOSSES The remarketing of equipment for an amount greater than its book value is reported as equipment sales margin (if the equipment is sold) or leasing margin (if the equipment is re-leased). The realization of less than the carrying value of equipment (which is typically not known until remarketing subsequent to the initial lease termination has occurred) is recorded as provision for losses. Residual values are established equal to the estimated value to be received from the equipment following termination of the lease. In estimating such values, the Partnership considers all relevant facts regarding the equipment and the lessee, including, for example, the likelihood that the lessee will re-lease the equipment. The nature of the Partnership's leasing activities is that it has credit and residual value exposure and, accordingly, in the ordinary course of business, it will incur losses from those exposures. The Partnership performs ongoing quarterly assessments of its assets to identify any other-than-temporary losses in value. No provision for losses were recorded in 1997, 1996 or 1995 because no other-than-temporary losses in the value of equipment were identified in the quarterly assessments of the Partnership's asset. MANAGEMENT FEES PAID TO GENERAL PARTNER The general partner earns management fees as compensation for services performed in connection with managing the Partnership's equipment equal to the lesser of (a) 5% of gross rentals received (limited to 2% of gross rentals received (limited to 2% of gross rentals received in the case of full payout leases) or (b) the fee which the general partner reasonably believes to be competitive with that which would be charged by a non-affiliate for rendering comparable services as permitted under the Partnership Agreement. Management fees decreased in 1996 and 1997 due to portfolio runoff resulting in lower gross rentals received by the Partnership. -8- Item 7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations, continued ------------- Results of Operations, continued - --------------------- DIRECT SERVICES FROM GENERAL PARTNER The general partner and its affiliates provide accounting, investor relations, billing, collecting, asset management, and other administrative services to the Partnership. The Partnership reimburses the general partner for these services performed on its behalf as permitted under the terms of the Partnership Agreement. Direct services from general partner decreased in 1996 due to portfolio runoff and increased in 1997 due to activities associated with liquidating the Partnership's assets. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses decreased in 1997 compared to 1996. The decrease is due to 1996 insurance costs offset by increases related to liquidation. General and administrative expenses increased in 1996 compared to 1995 primarily due to $107,928 reimbursed to the general partner during the second quarter of 1996 for insurance costs related to prior years. Liquidity and Capital Resources - ------------------------------- The Partnership funded its activities principally with cash from rents, interest income and sales of off-lease equipment. Available cash and cash reserves of the Partnership were invested in interest bearing accounts and short-term U.S. Government securities pending distributions to the partners. During 1997, 1996 and 1995, the Partnership declared distributions to the partners of $1,399,085, $2,442,105 and $1,801,042, respectively, all of which constituted a return of capital. Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital or both. The total return on capital over a leasing partnership's life can only be determined at the termination of the Partnership after all residual cash flows (which include proceeds from the re-leasing and sales of equipment after initial lease terms expire) have been realized. However, the general partner expects that all distributions to the partners will be a return of capital. The general partner anticipates that the Partnership will generate cash flow from rentals and equipment sales during 1998 which, when added to cash and cash equivalents on hand, should provide sufficient cash to enable the Partnership to meet its current operating requirements. Any remaining cash will be distributed to the Partners in accordance with the Partnership Agreement. The Partnership is required to dissolve and distribute all of its assets no later than December 31, 1998. The Class B limited partner distributions of cash from operations are subordinated to the Class A limited partners receiving cumulative distributions of cash from operations, as scheduled in the Partnership Agreement (i.e., 15%). Therefore, because the Class A limited partners have not received their total cumulative distributions, CAII, the sole Class B limited partner, is not receiving distributions of cash from operations, and, as a result of this subordination, the general partner currently anticipates that CAII will not receive any future Class B distributions. As a result, the general partner anticipates that CAII will only receive approximately $1.3 million or 54% of its original $2.5 million Class B investment. -9- Item 8. Financial Statements and Supplementary Data ------------------------------------------- Index to Financial Statements and Financial Statement Schedule Page Financial Statements Number -------------------- ------ Independent Auditors' Report 11 Balance Sheets as of December 31, 1997 and 1996 12 Statements of Income for the years ended December 31, 1997, 1996 and 1995 13 Statements of Partners' Capital for the years ended December 31, 1997, 1996 and 1995 14 Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 15 Notes to Financial Statements 16-24 Financial Statement Schedule ---------------------------- Independent Auditors' Report 25 Schedule II - Valuation and Qualifying Accounts 26 -10- INDEPENDENT AUDITORS' REPORT ---------------------------- THE PARTNERS LEASTEC INCOME FUND V, A CALIFORNIA LIMITED PARTNERSHIP: We have audited the accompanying balance sheets of Leastec Income Fund V, a California limited partnership, as of December 31, 1997 and 1996, and the related statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1, the Partnership is in the liquidation stage, whereby all assets are expected to be liquidated during 1998 and all cash distributed to the Partners, after satisfaction of liabilities. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Leastec Income Fund V, as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick LLP ------------------------ KPMG PEAT MARWICK LLP Denver, Colorado February 6, 1998 -11- LEASTEC INCOME FUND V A California Limited Partnership BALANCE SHEETS December 31, 1997 and 1996 ASSETS 1997 1996 ---- ---- Cash and cash equivalents $ 270,564 $ 465,217 Accounts receivable, net of allowance for doubtful accounts of $30,000 and $22,374 in 1997 and 1996, respectively 720,438 122,357 Equipment held for sale or re-lease 50,000 128,696 Net investment in direct finance leases - 1,105,111 Leased equipment, net 301,722 1,011,332 ----------- ----------- Total assets $ 1,342,724 $ 2,832,713 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accounts payable and accrued liabilities $ 317,417 $ 283,321 Payable to affiliates 40,854 31,361 Rents received in advance - 34,242 Distributions payable to partners - 225,019 Discounted lease rentals - 721,550 ------------ ----------- Total liabilities 358,271 1,295,493 ------------ ----------- Partners' capital: General partner - - Limited partners: Class A authorized 220,000 units; issued and outstanding, 198,025 units in 1997 and 1996 984,453 360,500 Class B - 1,176,720 ------------ ----------- Total partners' capital 984,453 1,537,220 ------------ ----------- Total liabilities and partners' capital $ 1,342,724 $ 2,832,713 ============ =========== See accompanying notes to financial statements. -12- LEASTEC INCOME FUND V A California Limited Partnership STATEMENTS OF INCOME Years ended December 31, 1997, 1996 and 1995 1997 1996 1995 ---- ---- ---- REVENUE: Operating lease rentals $ 1,051,376 $ 2,238,530 $ 3,459,761 Direct finance lease income 89,838 167,149 258,943 Equipment sales margin 792,671 525,245 183,660 Interest income 17,543 20,203 11,760 ----------- ----------- ----------- Total revenue 1,951,428 2,951,127 3,914,124 ----------- ----------- ----------- EXPENSES: Depreciation 627,253 1,172,100 2,090,097 Management fees paid to general partner 90,167 169,573 212,268 Interest on discounted lease rentals 47,483 122,830 278,693 Direct services from general partner 88,044 66,223 73,966 General and administrative 252,163 296,907 201,366 ----------- ----------- ----------- Total expenses 1,105,110 1,827,633 2,856,390 ----------- ----------- ----------- NET INCOME $ 846,318 $ 1,123,494 $ 1,057,734 =========== =========== =========== NET INCOME ALLOCATED: To the general partner $ 69,954 $ 122,105 $ 90,066 To the Class A limited partners 746,536 962,913 930,488 To the Class B limited partner 29,828 38,476 37,180 ----------- ----------- ----------- $ 846,318 $ 1,123,494 $ 1,057,734 =========== =========== =========== Net income per weighted average Class A limited partner unit outstanding $ 3.77 $ 4.86 $ 4.70 =========== =========== =========== Weighted average Class A limited partner units outstanding 198,025 198,166 197,993 =========== =========== =========== See accompanying notes to financial statements. -13- LEASTEC INCOME FUND V A California Limited Partnership STATEMENTS OF PARTNERS' CAPITAL Years ended December 31, 1997, 1996 and 1995
Class A Limited Class A Class B General Partner Limited Limited Partner Units Partners Partner Total ------- ----- -------- ------- ----- Partners' capital, January 1, 1995 $ - 198,715 $ 2,519,669 $ 1,101,064 $ 3,620,733 Redemptions - (240) (9,909) - (9,909) Net income 90,066 - 930,488 37,180 1,057,734 Distributions declared to partners (90,066) - (1,710,976) - (1,801,042) ----------- ------- ------------ ----------- ------------ Partners' capital, December 31, 1995 - 198,475 1,729,272 1,138,244 2,867,516 Redemptions - (450) (11,685) - (11,685) Net income 122,105 - 962,913 38,476 1,123,494 Distributions declared to partners (122,105) - (2,320,000) - (2,442,105) ----------- ------- ------------ ----------- ------------ Partners' capital, December 31, 1996 - 198,025 360,500 1,176,720 1,537,220 Net income 69,954 - 746,536 29,828 846,318 Adjustments - - 1,206,548 (1,206,548) - Distributions declared to partners (69,954) - (1,329,131) - (1,399,085) ----------- ------- ------------ ----------- ------------ Partners' capital, December 31, 1997 $ - 198,025 $ 984,453 $ - $ 984,453 =========== ======= ============ =========== ============
See accompanying notes to financial statements. -14- LEASTEC INCOME FUND V A California Limited Partnership STATEMENTS OF CASH FLOWS Years ended December 31, 1997, 1996 and 1995
1997 1996 1995 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 846,318 $ 1,123,494 $ 1,057,734 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 627,253 1,172,100 2,090,097 Cost of equipment sales 613,544 702,993 163,835 Recovery of investment in direct finance leases 675,370 640,280 714,250 Changes in assets and liabilities: Decrease (increase) in accounts receivable (620,830) 90,078 46,330 Increase (decrease) in accounts payable and accrued liabilities 34,096 47,474 (35,678) Increase in payable to affiliates 9,493 3,443 1,620 Decrease in rents received in advance (34,242) (6,652) (57,143) ------------ ------------ ------------ Net cash provided by operating activities 2,151,002 3,773,210 3,981,045 ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on discounted lease rentals (721,550) (1,339,784) (2,170,059) Distributions to partners (1,624,105) (2,403,187) (2,056,624) Redemptions of Class A limited partner units - (11,685) (9,909) ------------ ------------ ------------ Net cash used in financing activities (2,345,655) (3,754,656) (4,236,592) ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (194,653) 18,554 (255,547) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 465,217 446,663 702,210 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 270,564 $ 465,217 $ 446,663 ============ ============ ============ Supplemental disclosure of cash flow information: Interest paid on discounted lease rentals $ 47,483 $ 122,830 $ 278,693
See accompanying notes to financial statements. -15- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies ----------------------------------------------------------- Organization Leastec Income Fund V, a California limited partnership (the "Partnership"), was organized on August 28, 1987 as a limited partnership under the laws of the State of California pursuant to an Agreement of Limited Partnership (the "Partnership Agreement"). The general partner of the Partnership is CAI Partners Management Company, a wholly owned subsidiary of Capital Associates International, Inc. ("CAII"). The general partner manages the Partnership, including investment of funds, purchase and sale of equipment, lease negotiation and other administrative duties. CAII is the Class B limited partner. The Partnership was formed for the purpose of acquiring and leasing a portfolio of equipment to unaffiliated third parties. During 1997, the Partnership liquidated substantially all of its assets and distributed the related proceeds to the partners in accordance with the Partnership Agreement. The remaining assets will be liquidated and all liabilities settled during 1998. Any remaining cash will be distributed to the partners in accordance with the liquidation provisions in the Partnership Agreement. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. For leasing entities, this includes the estimate of residual values, as described below. Actual results could differ from those estimates. Partnership Cash Distributions and Allocations of Profit and Loss Cash Distributions ------------------ During the Distribution Period, as defined in the Partnership Agreement, cash distributions were made as follows: First, 95% to the Class A limited partners and 5% to the general partner until such time as all Class A limited partners received, on a cumulative, non-compounded basis, distributions equal to (1) 12% on their contributed capital during the first three years after the initial closing date (November 16, 1987), (2) 13% on their contributed capital during the fourth year after the initial closing date, (3) 14% on their contributed capital during the fifth year after the initial closing date and (4) 15% thereafter. -16- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Partnership Cash Distributions and Allocations of Profit and Loss, continued Cash Distributions, continued ------------------ Second, 95% to the Class B limited partner and 5% to the general partner until such time as the Class B limited partner received distributions equal to 11% per annum, cumulative, non-compounded, on its subordinated capital contribution. Third, any remaining available cash was reinvested or distributed to the partners as specified in the Partnership Agreement. During the Liquidation Phase, as defined in the Partnership Agreement, cash distributions are to be made as follows: First, in accordance with the first and second cash distribution provisions during the Distribution Period as described above. Second, 95% to the Class A limited partners and 5% to the general partner until the Class A limited partners have received aggregate distributions from all sources equal to their capital contributions plus their Priority Return as defined in the Partnership Agreement. Third, 85.5% to the Class B limited partner, 9.5% to the Class A limited partners and 5% to the general partner until the Class B limited partner has received aggregate distributions from all sources equal to its subordinated capital contribution plus its Subordinated Priority Return, as defined in the Partnership Agreement. Fourth, thereafter 90% to the Class A limited partners and the Class B limited partner (and among them in proportion to their respective capital contributions as of the first day of the calendar quarter for which the amount of such distribution is being determined), and 10% to the general partner. The Class B limited partner distributions of cash from operations are subordinated to the Class A limited partners receiving cumulative distributions of cash from operations, as scheduled in the Partnership Agreement (i.e., 15%). Therefore, because the Class A limited partners have not received their total cumulative distributions, CAII, the sole Class B limited partner, is not receiving distributions of cash from operations, and, as a result of this subordination, the general partner currently anticipates that CAII will not receive any future Class B distributions. As such, at December 31, 1997, the balance in the Class B limited partner capital account was transferred to the Class A limited partner capital accounts. -17- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Federal Income Tax Basis Profits and Losses ------------------------------------------- Profits for any period are allocated according to the following provisions: First, profit is allocated to the partners in proportion to, and to the extent of, any losses allocated to the partners as described in the Partnership Agreement. Second, any remaining profit is allocated 5% to the general partner and 95% to the limited partners, on a pari passu basis as described in the Partnership Agreement. Third, any remaining profit is allocated 90% to the limited partners (and among them in proportion to their respective capital contributions) and 10% to the general partner. Notwithstanding anything in the Partnership Agreement to the contrary, and before any other allocation is made, profits shall be allocated to the general partner until the aggregate profits so allocated in the current period and all prior periods are equal to the amount necessary to restore the general partner's capital account to zero. All such allocations shall be credited against any other allocations of profit to the general partner. Losses for any period are allocated according to the following priorities: First, to the partners in proportion to, and to the extent of, any profits allocated to them in reverse chronological order. Second, 99% to the limited partners (and among them in proportion to their respective capital contributions) and 1% to the general partner. The Partnership Agreement, as amended, provides for the allocation of a share of profits and losses to the Class B limited partner commensurate with its right to receive subordinated distributions of available cash. With respect to the Class A limited partners, the Partnership Agreement, as amended, provides that profits and losses allocated, and available cash distributed, will be shared by the individual Class A limited partners in proportion to their capital contributions and the number of days that each such Class A limited partner is a partner during each period. The Partnership Agreement, as amended, reflects (1) the actual method of allocations and distributions to the Class B limited partner that the Partner ship has used since the admission of the Class B limited partner to the Partnership, (2) allocations of profits and losses among the individual Class A limited partners, consistent with such allocations in 1990 and 1991, and (3) distributions of available cash among the individual Class A limited partners consistent with the Partnership's calculation and payment of such distributions since its inception. -18- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Recently Issued Financial Accounting Standards During 1997, the Partnership adopted SFAS No. 125, Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS No. 125"). SFAS No. 125 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The adoption of SFAS No. 125 did not have a material impact on the Partnership's financial position or results of operations. Long-lived Assets The Partnership accounts for long-lived assets under the provisions of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets and for Long- lived Assets to be Disposed Of ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets, including operating leases, and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the entity should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss for long-lived assets, including operating leases, and identifiable intangibles held by the Partnership is based on the fair value of the asset calculated by discounting the expected future cash flows at an appropriate interest rate. Lease Accounting Statement of Financial Accounting Standards No. 13, Accounting for Leases, requires that a lessor account for each lease by the direct finance, sales-type or operating lease method. The Partnership currently utilizes the direct financing and operating methods for all of the Partnership's equipment under lease. Direct finance leases are defined as those leases which transfer substantially all of the benefits and risks of ownership of the equipment to the lessee. For all types of leases, the determination of profit considers the estimated value of the equipment at lease termination, referred to as the residual value. After the inception of a lease, the Partnership may engage in financing of lease receivables on a non-recourse basis (i.e., "non-recourse debt" or "discounted lease rentals") and/or equipment sale transactions to reduce or recover its investment in the equipment. The Partnership's accounting methods and their financial reporting effects are described below. -19- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Net Investment in Direct Financing Leases ("DFLs") The cost of the equipment, including acquisition fees paid to the general partner, is recorded as net investment in DFLs on the accompanying balance sheet. Leasing revenue, which is recognized over the term of the lease, consists of the excess of lease payments plus the estimated residual value over the equipment's cost. Earned income is recognized monthly to provide a constant yield and is recorded as direct finance lease income on the accompanying income statements. Residual values are established at lease inception equal to the estimated value to be received from the equipment following termination of the initial lease (which in certain circumstances includes anticipated re-lease proceeds), as determined by the general partner. In estimating such values, the general partner considers all relevant information regarding the equipment and the lessee. Equipment on Operating Leases ("OLs") The cost of equipment, including acquisition fees paid to the general partner, is recorded as leased equipment in the accompanying balance sheets and is depreciated on a straight-line basis over the lease term to an amount equal to the estimated residual value at the lease termination date. Leasing revenue consists principally of monthly rents and is recognized as operating lease rentals in the accompanying income statements. Residual values are established at lease inception equal to the estimated value to be received from the equipment following termination of the initial lease (which in certain circumstances includes anticipated re-lease proceeds), as determined by the general partner. In estimating such values, the general partner considers all relevant information and circumstances regarding the equipment and the lessee. Because revenue and depreciation expense are recorded on a straight-line basis, and interest expense on discounted lease rentals (discussed below) is recorded using the interest method, lower margins are realized in the early years of the term of an OL and higher margins in later years. Non-recourse Discounting of Rentals The Partnership may assign the future rentals from leases to financial institutions, or acquire leases subject to such assignments, at fixed interest rates on a non-recourse basis. In return for such assigned future rentals, the Partnership receives the discounted value of the rentals in cash. In the event of default by a lessee, the financial institution has a first lien on the underlying leased equipment, with no further recourse against the Partnership. Cash proceeds from such financings, or the assumption of such financings, are recorded on the balance sheet as discounted lease rentals. As lessees make payments to financial institutions, leasing revenue and interest expense are recorded. -20- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Allowance for Losses An allowance for losses is maintained at levels determined by the general partner to adequately provide for any other-than-temporary declines in asset values. In determining losses, economic conditions, the activity in the used equipment markets, the effect of actions by equipment manufacturers, the financial condition of lessees, the expected courses of action by lessees with regard to leased equipment at termination of the initial lease term, and other factors which the general partner believes are relevant, are considered. Asset chargeoffs are recorded upon the termination or remarketing of the underlying assets. Cost of equipment sales for the year ended December 31, 1997 includes a reversal of approximately $426,000 for amounts previously provided for estimated other-than-temporary declines in asset values. The lease portfolio is reviewed quarterly to determine the adequacy of the allowance for losses. Transactions Subsequent to Initial Lease Termination After the initial lease term of equipment on lease expires, the equipment is either sold or re-leased to the existing lessee or another third party. The remaining net book value of equipment sold is removed and gain or loss recorded when equipment is sold. The accounting for re-leased equipment is consistent with the accounting described under "Net Investment in Direct Finance Leases" and "Equipment on Operating Leases" above. Income Taxes No provision for income taxes has been made in the financial statements since taxable income or loss is recorded in the tax returns of the individual partners. Cash Equivalents The Partnership considers short-term, highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents. Cash equivalents of $269,052 and $428,000 at December 31, 1997 and 1996, respectively, are comprised of investments in a money market fund which invests solely in U.S. Government securities having maturities of 90 days or less. Equipment Held for Sale or Re-lease Equipment held for sale or re-lease, recorded at the lower of cost or market value expected to be realized, consists of equipment previously leased to end users which has been returned to the Partnership following lease expiration. -21- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Net Income Per Class A Limited Partner Unit Net income per Class A limited partner unit is computed by dividing the net income allocated to the Class A limited partners by the weighted average number of Class A limited partner units outstanding during the period. 2. Net Investment in Direct Finance Leases --------------------------------------- The components of the net investment in direct finance leases as of December 31, 1996 were: 1996 ----------- Minimum lease payments receivable $ 772,923 Estimated residual values 451,697 Less unearned income (119,509) ----------- Total $ 1,105,111 =========== 3. Leased Equipment ---------------- The Partnership's investment in equipment on operating leases by major classes as of December 31, 1997 and 1996 were: 1997 1996 ---- ---- Office furniture and equipment $ 2,681,979 $ 2,844,991 Transportation and industrial equipment - 1,267,779 Computers and peripherals - 1,054,671 Other - 985,359 ------------ ------------ 2,681,979 6,152,800 Less: Accumulated depreciation (2,380,257) (4,510,576) Allowance for losses - (630,892) ------------ ------------ $ 301,722 $ 1,011,332 ============ ============ Depreciation expense for 1997, 1996 and 1995 was $627,253, $1,172,100 and $2,090,097, respectively. -22- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 4. Transactions With the General Partner and Affiliates ---------------------------------------------------- Management Fees --------------- The general partner earns management fees as compensation for services performed in connection with managing the Partnership's equipment equal to the lesser of (a) 5% of gross rentals received (limited to 2% of gross rentals received in the case of full payout leases) or (b) the fee which the general partner reasonably believes to be competitive with that which would be charged by a non-affiliate for rendering comparable services as permitted under the Partnership Agreement. Such fees totaled $90,167, $169,573 and $212,268 in 1997, 1996 and 1995, respectively. Direct Services --------------- The general partner and its affiliates provide accounting, investor relations, billing, collecting, asset management, and other administrative services to the Partnership. The Partnership reimburses the general partner for these services performed on its behalf as permitted under the terms of the Partnership Agreement. Such reimbursements totaled $88,044, $66,223 and $73,966 in 1997, 1996 and 1995, respectively. Payable to Affiliates --------------------- Payable to affiliates consists primarily of direct services and management fees payable to the general partner. Disposition Fee --------------- The general partner is entitled to a subordinated fee with respect to each sale of equipment in an amount not to exceed the lesser of (a) 50% of the fee that would be charged by an unaffiliated party or (b) 2% of the gross equipment sales price. The disposition fee has not and will not be paid to the general partner until the Class A limited partners have received cash distributions in an amount equal to their capital contributions plus an 8% annual, cumulative return compounded daily on their adjusted capital contributions, calculated from and after the first day of the month following the month that each Class A limited partner is admitted to the Partnership. The Partnership has not accrued any disposition fees since inception as it is anticipated that the limited partners will not receive the minimum distributions described above. 5. Tax Information (Unaudited) --------------------------- The following reconciles net income for financial reporting purposes to income (loss) for federal income tax purposes for the years ended December 31,: -23- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 5. Tax Information (Unaudited), continued ---------------------------
1997 1996 1995 ---- ---- ---- Net income per financial statements $ 846,318 $ 1,123,496 $ 1,057,734 Differences due to: Direct finance leases 424,796 560,141 714,250 Depreciation 145,063 (17,966) 302,792 Gain (loss) on sale of equipment (34,290) 296,780 (72,043) Other (232,236) 74,033 (64,961) ----------- ----------- ----------- Partnership income for federal income tax purposes $ 1,149,651 $ 2,036,484 $ 1,937,772 =========== =========== ===========
As of December 31, 1997, the partners' capital accounts per the financial statements totaled $984,453 compared to partners' capital accounts for federal income tax purposes of $6,946,500 (unaudited). The difference arises primarily from commissions reported as a reduction in partners' capital for financial reporting purposes but not for federal income tax purposes, and temporary differences related to direct finance leases, depreciation, and provisions for losses. 6. Concentration of Credit Risk ---------------------------- Approximately 51% of the Partnership's equipment under lease was leased to investment grade lessees. Pursuant to the Partnership Agreement, an investment grade lessee is a company (1) with a credit rating of not less than Baa, as determined by Moody's Investor Services, Inc. or (2) that has comparable credit ratings, as determined by other recognized credit rating services, or (3) which, if not rated by a recognized credit rating service, then in the opinion of the general partner, is of comparable credit quality. The Partnership's cash balance is maintained with a high credit quality financial institution. At times such balances may exceed the FDIC insurance limit due to the receipt of lockbox amounts that have not cleared the presentment bank (generally for less than two days). As funds become available, they are invested in a money market mutual fund. 7. Disclosures about Fair Value of Financial Instruments ----------------------------------------------------- Statement of Financial Standards No. 107, Disclosures about Fair Value of Financial Instruments specifically excludes certain items from its disclosure requirements such as the Partnership's investment in leased assets. The carrying amounts at December 31, 1997 for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, payable to affiliates, rents and sale proceeds received in advance and distributions payable to partners approximate their fair values due to the short maturity of these instruments. -24- INDEPENDENT AUDITORS' REPORT ---------------------------- THE PARTNERS LEASTEC INCOME FUND V A CALIFORNIA LIMITED PARTNERSHIP: Under date of February 6, 1998, we reported on the balance sheets of Leastec Income Fund V, a California limited partnership, as of December 31, 1997 and 1996, and the related statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1997, as contained in the Partnership's annual report on Form 10-K for the year 1997. In connection with our audits of the aforementioned financial statements, we also audited the related financial statement Schedule II, as listed in the accompanying index. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/KPMG Peat Marwick LLP ------------------------ KPMG PEAT MARWICK LLP Denver, Colorado February 6, 1998 -25- LEASTEC INCOME FUND V A California Limited Partnership SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - -------- ---------- --------------------------- ------------ --------- Additions Balance at (Deductions) Balance Beginning Equipment Charged to at end Classification of Period sales Other Accounts Deductions of Period - -------------- ---------- --------- -------------- ------------ --------- (1) (2) (3) 1997 - --------------------- Allowance for losses: Accounts receivable $ 22,374 $ - $ 27,491 $ (19,865) $ 30,000 Equipment on leases 630,892 (425,754) (27,491) (177,647) - --------- ---------- --------- ---------- --------- Totals $ 653,266 $ (425,754) $ - $ (197,512) $ 30,000 ========= ========== ========= ========== ========= 1996 - --------------------- Allowance for losses: Accounts receivable $ 22,374 $ - $ - $ - $ 22,374 Equipment on leases 678,636 - (47,744) - 630,892 --------- ---------- --------- ---------- --------- Totals $ 701,010 $ - $ (47,744) $ - $ 653,266 ========= ========== ========= ========== ========= 1995 - --------------------- Allowance for losses: Accounts receivable $ 22,374 $ - $ - $ - $ 22,374 Equipment on leases 671,936 - 6,700 - 678,636 --------- ---------- ---------- ----------- ---------- Totals $ 694,310 $ - $ 6,700 $ - $ 701,010 ========= ========== ========== =========== ==========
(1) Equipment sales in excess of prior established provision for losses. (2) Represents reclassifications to and from other reserve accounts and asset and liability accounts. (3) Represents allowance charge-offs. See accompanying independent auditors' report. -26- Item 9. Disagreements on Accounting and Financial Disclosures ----------------------------------------------------- None Item 10. Directors and Executive Officers of the Partnership --------------------------------------------------- The Partnership has no officers and directors. The general partner manages and controls the affairs of the Partnership and has general responsibility and authority in all matters affecting its business. Information concerning the directors and executive officers of the general partner is as follows: CAI Partners Management Company Name Positions Held ---- -------------- John F. Olmstead President and Director Dennis J. Lacey Senior Vice President and Director Anthony M. DiPaolo Senior Vice President, Principle Financial and Chief Administrative Officer and Director Richard H. Abernethy Vice President and Director John A. Reed Vice President, Assistant Secretary and Director Joseph F. Bukofski Vice President, Assistant Secretary and Director Robert A. Golden Director Mick Myers Director Ann Danielson Assistant Vice President David J. Anderson Chief Accounting Officer and Secretary JOHN F. OLMSTEAD, age 53, joined CAII as Vice President in December, 1988, is a Senior Vice President of CAI and CAII and is head of CAII's Public Equity division. He has served as Chairman of the Board for Neo-kam Industries, Inc., Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has over 20 years of experience holding various positions of responsibility in the leasing industry. Mr. Olmstead holds a Bachelor of Science degree from Indiana University and a Juris Doctorate degree from Indiana Law School. DENNIS J. LACEY, age 44, joined CAI as Vice President, Operations, in October 1989. Mr. Lacey was appointed Treasurer on January 1, 1991, Chief Financial Officer on April 11, 1991, a director on July 19, 1991, and President and Chief Executive Officer on September 6, 1991. Prior to joining CAI, Mr. Lacey was an audit partner for the public accounting firm of Coopers & Lybrand. Mr. Lacey is also a director and senior officer of CAII, CAI Equipment Leasing I Corp., CAI Equipment Leasing II Corp., CAI Equipment Leasing III Corp., CAI Equipment Leasing IV Corp., CAI Equipment Leasing V Corp., CAI Leasing Canada, Ltd., CAI Partners Management Company, CAI Securities Corporation, CAI Lease Securitization I Corp. and Capital Equipment Corporation (collectively referred to herein as the "CAI Affiliates"), all of which are first- or second-tier wholly-owned subsidiaries of CAI. -27- Item 10. Directors and Executive Officers of the Partnership, continued --------------------------------------------------- ANTHONY M. DIPAOLO, age 39, joined CAII in July 1990 as Assistant Treasurer and is currently Senior Vice President-Chief Financial Officer. He also held the positions of Senior Vice President-Controller and Assistant Vice President-Credit Administration for the Company. Mr. DiPaolo has held similar senior financial management positions with two public companies between 1986 and June 1990, and prior to then was an audit manager for the public accounting firm of Coopers & Lybrand. Mr. DiPaolo holds a Bachelor of Science degree in Accounting from the University of Denver. RICHARD H. ABERNETHY, age 43, joined CAII in April 1992 as Equipment Valuation Manager and currently serves as Vice President of Asset Management. Mr. Abernethy has thirteen years experience in the leasing industry, including prior positions with Barclays Leasing Inc., from November 1986 to February 1992, and Budd Leasing Corporation, from January 1981 to November 1986. Mr. Abernethy holds a Bachelor of Arts in Business Administration from the University of North Carolina at Charlotte. JOHN A. REED, age 42, joined CAII in January 1990 as the Tax Director and Assistant Secretary. Mr. Reed is currently the Vice President-Manager, Capital Markets Group and is responsible for all lease documentation and management of transaction structuring and processing. Prior to joining the Marketing Department, Mr. Reed was Vice President of Credit and Debt Administration. He spent seven and one half years with Coopers & Lybrand in the Tax Department and served on CAII's tax consulting engagement during that time. Mr. Reed holds a Bachelor of Arts degree in Social Sciences and Masters of Science in Accounting, from Colorado State University. JOSEPH F. BUKOFSKI, age 43, joined CAII in June 1990 as a Financial Analyst. Mr. Bukofski is currently the Vice President of Marketing and is responsible for all lease documentation and management of transaction structuring and processing. Prior to joining the Marketing Department, Mr. Bukofski was Assistant Vice President and Controller. Prior to joining the Company, he was a geologist with Barringer Geoservices, Inc. for eleven years. Mr. Bukofski holds a Bachelor of Science degree in Secondary Education - Earth Science from Bloomsburg University and a Masters of Science in Accounting from the University of Colorado. ROBERT A. GOLDEN, age 52, is Vice President and the National Sales Manager of the Company. Mr. Golden joined the Company in 1993 as a Branch Manager. He was promoted to his current position in September 1994. Prior to joining the Company, he was an Executive Vice President with the U.S. Funds Group, President of BoCon Capital Group and Vice President with Ellco/GE Capital for fifteen years. Mr. Golden is an officer, but not a director, of CAII. MICK MYERS, age 40, joined CAI in February 1992 as a Senior Portfolio Manager. Currently he is Assistant Vice President of Asset Management. Mr. Myers has nine years experience in the leasing industry. Previously, he has held the position of Senior End of Lease Negotiator with ELLCO/GE Capital. Mr. Myers holds a Bachelor of Science degree from the University of Wyoming. -28- Item 10. Directors and Executive Officers of the Partnership, continued --------------------------------------------------- ANN E. DANIELSON, age 34, joined CAII in February 1990 and is currently Assistant Vice President, Assistant Treasurer and is responsible for the Company's cash management and collections functions. Prior to joining the Company, she was with U.S. West financial Services and Coopers & Lybrand. Ms. Danielson holds a Bachelor of Arts Degree from the University of Northern Iowa. DAVID J. ANDERSON, age 45, joined CAII in August 1990 as Manager of Billing & Collections and currently serves as Assistant Vice-President/Chief Accounting Officer. Prior to joining CAII, Mr. Anderson was Vice- President/Controller for Systems Marketing, Inc., from 1985 to 1990, and previous to that worked in several senior staff positions at the Los Alamos National Laboratory and with Ernst & Whinney. Mr. Anderson holds a Bachelor of Business Administration degree in Accounting from the University of Wisconsin. Item 11. Executive Compensation ---------------------- No compensation was paid by the Partnership to the officers and directors of the general partner. See Item 13 of this Report, "Certain Relationships and Related Transactions", for a description of the compensation and fees paid to the general partner and its affiliates by the Partnership during 1997. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- (a) As of the date hereof, no person is known by the Partnership to be the beneficial owner of more than 5% of the Class A limited partner units of the Partnership. The Partnership has no directors or officers, and neither the general partner nor the Class B limited partner of the Partnership owns any Class A limited partner units. CAII, the parent of the general partner, is the sole Class B limited partner. CAI Partners Management Company is the sole general partner. The names and addresses of the general partner and the Class B limited partner are as follows: General Partner --------------- CAI Partners Management Company 7175 West Jefferson Avenue Suite 4000 Lakewood, Colorado 80235 -29- Item 12. Security Ownership of Certain Beneficial Owners and Management, ----------------------------------------------------------------------- continued Class B Limited Partner ----------------------- Capital Associates International, Inc. 7175 West Jefferson Avenue Suite 4000 Lakewood, Colorado 80235 (b) No directors or officers of the general partner or the Class B limited partner owned any Class A limited partner units as of December 31, 1997. (c) The Partnership knows of no arrangements, the operation of which may at a subsequent date result in a change in control of the Partnership. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- The general partner and its affiliates receive certain types of compensation, fees or other distributions in connection with the operations of the Partnership. Following is a summary of the amounts paid or payable to the general partner and its affiliates during 1997: Management Fee - -------------- The general partner earns a monthly fee as compensation for services rendered in connection with the management of the Partnership's equipment in an amount equal to the lesser of (i) 5.0% of gross rentals received by the Partnership (but limited to 2.0% of gross rentals received in the case of full payout leases), or (ii) the fee which the general partner reasonably believes to be competitive with that which would be charged by a non-affiliate for rendering comparable services. The general partner earned $90,167 of management fees during 1997. Disposition Fee - --------------- The general partner earns a subordinated fee with respect to each sale of equipment in an amount equal to the lesser of (i) 50% of the fee that would be charged by an unaffiliated party, or (ii) 2% of the gross equipment sale price. The disposition fee has not and will not be paid to the general partner until the Class A Limited Partners have received cash distributions in an amount equal to their capital contributions plus 8% annual cumulative return compounded daily on their adjusted capital contributions, calculated from and after the first day of the month following the month that each Class A Limited Partner is admitted to the Partnership. The Partnership did not accrue any disposition fees in 1997 as it is anticipated that the limited partners will not recover the aforementioned amounts. -30- Item 13. Certain Relationships and Related Transactions, continued ---------------------------------------------- Accountable General and Administrative Expenses - ----------------------------------------------- The general partner is entitled to reimbursement of certain expenses paid on behalf of the Partnership which are incurred in connection with the Partnership's operations. The general partner received $88,044 of expense reimbursements during 1997. The general partner receives 5.0% of Partnership cash distributions and is allocated certain Partnership income or loss relating to its general partner interest in the Partnership. Distributions paid and income allocated to the general partner totaled $69,954 and $69,954, respectively, for 1997. Distributions paid and income allocated to the Class B limited partner were $0 and $29,828, respectively, for 1997. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K --------------------------------------------------------------- (a) and (d) The following documents are filed as part of this Report: 1. Financial Statements 2. Financial Statement Schedule (b) There were no reports on Form 8-K filed during the three months ended December 31, 1997. (c) Exhibits required to be filed. Exhibit Number Exhibit Name ------ ------------ 3* Leastec Income Fund V Limited Partnership Agreement (Filed as Exhibit A on Form S-1 in September 1987) 4.1* Subscription Agreement and Power of Attorney (Filed as Exhibit B on Form S-1 in September 1987) 4.2* First Amendment to Limited Partnership Agreement dated October 14, 1987 (Filed on October 14, 1987) 4.3* Second Amendment to Limited Partnership Agreement dated March 31, 1992 (Filed on May 15, 1992) 4.4* Third Amendment to Limited Partnership Agreement dated June 30, 1992 * Not filed herewith. In accordance with Rule 12b-32 of the General Rules and Regulations under the Securities Exchange Act of 1934, reference is made to the document previously filed with the Commission. -31- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 30, 1998 Leastec Income Fund V, A California Limited Partnership By: CAI Partners Management Company By: /s/John F. Olmstead ------------------------------- John F. Olmstead President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the general partner of the Partnership and in the capacities indicated on March 30, 1998. Signature Title - --------- ----- /s/John F. Olmstead - ----------------------- John F. Olmstead President and Director /s/Dennis J. Lacey - ----------------------- Dennis J. Lacey Senior Vice President and Director /s/Anthony M. DiPaolo - ----------------------- Senior Vice President, Principle Financial and Chief Anthony M. DiPaolo Administrative Officer and Director /s/Richard H. Abernethy - ----------------------- Richard H. Abernethy Vice President and Director /s/John A. Reed - ----------------------- John A. Reed Vice President, Assistant Secretary and Director /s/Joseph F. Bukofski - ----------------------- Joseph F. Bukofski Vice President, Assistant Secretary and Director /s/Robert A. Golden - ----------------------- Robert A. Golden Director /s/Mick Myers - ----------------------- Mick Myers Director /s/Ann Danielson - ----------------------- Ann Danielson Assistant Vice President /s/David J. Anderson - ----------------------- David J. Anderson Chief Accounting Officer and Secretary -32- EX-27 2 4Q97LIFV.001
5 The schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of income and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1997 DEC-31-1997 270,564 0 720,438 0 50,000 0 301,722 0 1,342,724 0 0 0 0 0 984,453 1,342,724 792,671 1,951,428 0 1,105,110 178,211 0 47,483 846,318 0 846,318 0 0 0 846,318 3.77 3.77
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